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As you may know, many industries, including just about all domestic manufacturers of casters and material handling products, have outsourced manufacturing to China and are importing portions of their product lines.
As a distributor of manufactured products, our supply chain and pricing have been impacted by this trend and are now increasingly dependent upon the Chinese calendar and economy.
We would like all customers to understand some of the economic changes in China and their impact on our business:
VAT Rebates (Value Added Tax)
The Chinese government has historically provided a Value Added Tax (VAT) rebate to its companies that manufacture and export products to the U.S. In January 2007, the Chinese government reduced their VAT rebate from 17% to 13%. Then, in July 2007, this VAT rebate was further reduced from 13% to 9% on heavy duty casters, and from 13% to 5% on light duty casters. The net effect of these rebate reductions are price increases to importers in excess of 10% on casters manufactured in China. Furthermore, the VAT rebate on plastic, nylon, bearings, axles, nuts, etc. has also been reduced, resulting in price increases on these caster-related commodities as well.
Currency Changes
In 2005, China ceased linking their currency (RMB) exclusively to the U.S. dollar for valuation and began measuring their currency value against several international currencies. Since then, the Chinese RMB has appreciated to the point where it has resulted in additional currency-related price increases to importers of nearly 10%.
Raw Material/Energy Increases
Costs for raw materials, such as mild and stainless steel have increased worldwide by over 30% during the past two years. Combined with ongoing increases in energy and related freight expenses, further upward pressure on pricing for importers has been applied.
As the global economy changes, please know that Northwest Caster & Equipment is doing everything we can to provide high quality products at competitive pricing. We continue to work with a select group of manufacturing partners who are committed to global sourcing and cost controls, and we continue to negotiate bulk buys, volume discounts and rebates.
However, in response to the events noted above, we are currently receiving price increases from our manufacturing partners in the 5% to 10% range. As a result, we are forced to adjust our prices accordingly.
We apologize for any inconvenience this announcement may cause. We greatly value our relationships with all of our customers and sincerely appreciate your business.
Thank you for reading this announcement and for your understanding.
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